Washington: The United States has confirmed that American citizens are among those taken hostages by an Islamist extremist group in Algeria, with Defence Secretary Leon Panetta terming it as a "terrorist act".

"By all indications, this is a terrorist act, and the United States strongly condemns these kinds of terrorist acts. It is a very serious matter when Americans are taken hostage along with others," Panetta said.

"I want to assure the American people that the United States will take all necessary and proper steps that are required to deal with this situation," he said according to Pentagon transcripts.

"The best information that we have at this time is that US citizens are among the hostages," State Department spokesperson Victoria Nuland told reporters. She refused to give the numbers and names of US nationals taken hostages.

"We will leave it to other governments to handle their citizens as they see fit. Beyond confirming that there are Americans among the hostages, I will ask you to respect our decision not to get into any further details as we try to secure these people," she said.

Nuland condemn in strongest terms the terrorist attack on British Petroleum personnel and facilities at In Amenas, Algeria on Wednesday.

"We're in contact with Algerian authorities and our diplomatic counterparts in Algiers, as well as with BP's security office in London," she said.

Republican Congressman Ed Royce, Chairman of the powerful House Foreign Affairs Committee, said the terrorist attack in Algeria is the latest demonstration of a large and growing radical movement across North Africa.

"Al-Qaeda in the Islamic Maghreb (AQIM) and its offshoots have been conducting regular kidnappings for years – financing much of its operations through ransoms, earning millions. The network has planted deep roots in Europe. In recent years, cells have been broken up by authorities in France, Germany, Italy, Spain and Switzerland. In Mali, its brethren are imposing the strictest interpretation of Islamic law – banning music and chopping off limbs. Large amounts of weapons are flowing into the region," he said.

"It is because of the severity of this threat that the French have appropriately acted," Royce said.

Congressman Mike Rogers, Chairman of the House Permanent Select Committee on Intelligence, said that the kidnapping of Americans and other westerners in Algeria brazenly raises the stakes in an already very volatile region.

"Militant groups and terrorists with ties to AQIM are becoming increasingly brash in their activities. The Obama Administration needs to have a clear and focused policy on eliminating the threats that diverse al-Qaeda affiliated groups pose to the United States and to Americans working abroad off of the usual battlefields," he said.